Budget proposals 2014-2015: LTU advises to set up panel for assessing fair market value of properties; to minimize litigation

KARACHI: The Large Taxpayers Unit (LTU) has proposed the government to establish panel of experts for assessing the fair market value of properties in the real sector for identifying potential taxpayers.
The tax managers proposed this amendment to reduce the size of litigation since a number of identified persons moved to the court of law against the FBR/s definition of property value in the presence of provincial collector’s rates.
The amendment suggested to Section 68 of fair market value under the provision of Income Tax Ordinance, 2001.
It suggested the draft amendment as: “(1) for the purpose of this ordinance, the fare market value of any property and rent, asset, service, benefit or perquisite at a particular time shall be the price which the property or rent, asset, service, benefit or perquisite would ordinarily fetch on sale or supply in the open market at that time; (2) the fare market value of any property or rent, asset, service, benefit or perquisite shall be determined without regard to any restriction on transfer or to the fact that it is not otherwise convertible to cash; (3) where the price referred to in Sub-Section (1) is not ordinarily ascertainable, such price may be determined by the commissioner; (4) notwithstanding anything contain in Sub-Section (3), the board may appoint a panel of experts, possessing such qualifications and experience as may be prescribed by the rules, for determining the fair market value of any properties and rent, assets belonging to a particular class of assets, services, benefits or perquisites for the purpose of this ordinance, on remuneration prescribed by the rules; (5) subject to Sub-Section (4) the commissioner mat refer the matter related to valuation of fair market value of any property or rent, asset, service, benefit or perquisite for the purpose of this section.”
The LTU has proposed amendment to Section 99 of special provisions relating to insurance business to clarify anomaly and disallowance on account for not verifying expenses.
It suggested the drafted amendment as: “subject to the provisions of Section 21, 67, division IV of part IV of chapter III and Section 174 of this ordinance (which provisions shall be always deemed to have overriding effect upon this section), the profit and gains of any insurance business shall be computed in accordance with the rules in the fourth schedule.”
The amendment proposed to Section 100 of special provisions relating to the production of oil and natural gas, and exploration an extraction of other mineral deposits to clarify an anomaly and disallowances on account for not verifying expenses due to recent litigation in banking cases.
The proposed amendment is: “(1) subject to the provisions of Section 21, 67, division IV of part IV of chapter III, Section 174, and Sub-Section (2) of this section (which provisions shall always be deemed to have an overriding effect upon this section), the profits and gains from (a) the exploration and production of petroleum including natural gas and from refineries set up at the Dhodak and Bobi fields; (b) the pipeline operation of exploration and production companies; (c) the manufacture and sale of liquefied petroleum gas or compressed natural gas. And the tax payable thereon shall be computed in accordance with the rule in part I of the fifth schedule.”
The unit has proposed amendment to Section 100A of special provisions relating to banking business to clarify the anomalies and disallowance on account for not verifying expenses.
The proposed amendment is: “(1) subject to Section 21, 67, division IV of part IV of chapter III of Section 174 of this ordinance (which provisions shall be always deemed to have an overriding effect upon this section), the income, profit and gains of any banking company as defined in clause (7) of Section 2 and tax payable thereon shall be computed in accordance with the rules I the seventh schedule.”
LTU has proposed an amendment to Section 113(1) of minimum tax on the income of certain persons just to provide incentives for loss making entities.
It suggested the draft amendment as: “this section shall apply to a resident company, an individual (having turnover of Rs 50 million or above in the tax year 2009 or in any subsequent tax year) and an association of persons (having turnover of Rs 50 million or above in the tax year 2007 or in any subsequent tax year) where, for any reason whatsoever allowed under this ordinance, including any other law for the time being in forced. (a) loss for the year; (b) the setting off al loss of an earlier year; (c) exemption from tax; (d) the application of credits or rebates; or (e) the claiming of allowances or deductions (including depreciation and amortization deductions) no tax is payable or paid by the person for a tax year or the tax payable or paid by the person for a tax year is less than one percent of the amount representing the persons turnover from all sources for that year: 2 where this section applies (a) the aggregate of the persons turnover as defined in sub-section (3) for the tax year shall be treated as the income of the person for the year chargeable to tax; (b) the person shall pay as income tax for the tax year (instead of the actual tax payable under this ordinance), an amount equal to one percent of the persons turnover for the year.”
LTU has proposed an amendment to Section 122A of revision by the commissioner in which enable the commissioner to take action on an application filed by the taxpayer and in case of the maladministration to reduce the burden of the Federal Tax Ombudsman (FTO).
The suggested amendment is: “(1) the commissioner may, either suo moto or on an application field by the tax payer, call for the record of any proceeding under this ordinance or under the repealed ordinance in which an order has been passed by any officer of Inland Revenue other than the commissioner (appeals). (2) subject to sub-section (3), where, after making such inquiry as is necessary, commissioner considers that order requires revision due to the reason that: (a) the orders suffer from maladministration, or (b) the officer of Inland Revenue has excursive a jurisdiction not vested in him by law, or (C) the officer of Inland Revenue has failed to exercise a jurisdiction so vested, or (D) the officer of Inland Revenue has acted in the exercise of its jurisdiction illegally or with material irregularity; the commissioner may make such revision to the order as the commissioner deems fit. (3) an order under Sub-Section (2) shall not be prejudicial to the person to whom the order relates. (4) the commissioner shall not revise any order under Sub-Section (2) if; (a) an appeal against the order lies to the commissioner (appeals) to the appellate tribunal. The time within which such appeal may be made has not expired; or (b) the order is pending in appeal before the commissioner (appeals) or has been made the subject of an appeal to the appellate tribunal.”
The LTU has proposed an amendment to Section 122B of revision by the chief commissioner in order to provide a remedy in the mainstream of the appellate system.
It suggested the drafted amendment as: “(1) the chief commissioner may, either of this own motion or on an application by the tax payer for revision, call for the record of any proceedings relating to issuance of an exemption or lower rate certificates with regard to collection or deduction of tax at source under this ordinance, in which an order has been passed by any authority subordinate to him; (2) where, after making such inquiry as is necessary, chief commissioner considers that the order required revision, the chief commissioner may, after providing reasonable opportunity of being heard to the tax payer, make such order as he may deem fit in the circumstances of the case. (3) a taxpayer aggrieved with the order of the chief commissioner may file appeal before the Federal Board of Revenue against the order under Sub-Section (2) and all the provisions of 131 and 132 shall apply accordingly.”
The unit has proposed amendment to Section 123 of provisional assessment in certain cases to extend the scope of all concealed assets and to ensure speedy finalization of these cases after provisional assessment is initiated.
The suggested amendment is: “ (1) where a concealed asset of any person is discovered by the commissioner or is impounded by any department or agency of the federal government or a provisional government, a commissioner may, at any time before issuing any assessment order under Section 121 or any amended assessment order under Section 122, issue to the person a provisional assessment order or provisional amended assessment order, as the case may be, for the last completed tax year of a person taking into account the concealed asset. Provide that the order under this sub-section shall be served upon the person as soon as is practicable. (2) notwithstanding anything contain Sub-Section (1), the commissioner shall issue an order under Section 121 or 122 of this ordinance within 180 days of the date on which an order Sub-Section (1) has been served upon the person, in every case where a provisional assessment order or a provisional amended assessment order has been issued, and the order issued under Sub-Section (1) shall seas to have effect on the date on which an order this sub-section is issued. (3) in this section, ‘concealed asset’ means any property or asset which, in the opinion of the commissioner was acquired from any income subject to tax under this ordinance and the commissioner has reason to believe that the tax payable under the provisions of this ordinance has not been paid by the person.”